Is Your Location Adopting Building Energy Performance Standards? Here’s What to Do

Calculating the cost-effectiveness of a building project doesn’t end when the ribbon is cut and the last contractor truck leaves the job site.

Today more than ever, conscientious owners look at the lifetime costs of a building instead of just the short-term construction outlay when choosing materials and reviewing design options.

These decisions are critical for a building’s long-term operation and maintenance costs.

In a similar fashion, conscientious owners of older buildings strive to improve energy performance through a continuous process of benchmarking, improved operations and maintenance, energy audits, and upgrades to building systems and components.

All of these measures are now well-developed and accepted by a broad cross-section of building owners, operators, and energy professionals.

A new policy tool—the building energy performance standard (BEPS)—leverages these well-established measures and allows states and cities to address the “existing building” side of the building energy-efficiency equation in a comprehensive fashion.

Here’s what you need to know about building energy performance standards.

What is the Building Energy Performance Standard?

According to the Institute for Market Transformation, a BEPS “is a forward-thinking policy commitment in which a city [or other jurisdiction] establishes the long-term, high-performance standard, with interim targets that ratchet up over time.

The combination of short- and long-term goals assures that building performance improves consistently over time and also sends appropriate market signals to discourage investments in long-lived, inefficient, and environmentally damaging technology.”

In general, these performance standards work by setting targets based on energy use intensity (EUI) or carbon emissions intensity (i.e., energy use or carbon emissions per square foot) and requiring buildings that fail to meet these targets by a certain date to implement a number of performance and/or prescriptive measures to lower energy use.

Another shared characteristic is the use of multiple compliance periods lasting five or six years.

From one compliance period to the next, the performance standards become stricter and building owners repeat many of the same compliance steps taken during the first period if their buildings exceed the new, more stringent goals.

Targets are specific to building type/use and, in many instances, the calculation methods are similar to those used under EPA’s ENERGY STAR Portfolio Manager.

The ultimate goal of a BEPS is to increase building safety, resilience, and energy efficiency over time in a cost-effective manner.

Also, conscious of regional differences in construction, climate, and energy demands, the jurisdiction adopting a BEPS can tailor the requirements to local conditions.

How Policies Drive Efficiency Improvements

In 2019, Washington State, New York City, and the District of Columbia enacted BEPS policies that require building owners to address energy waste in existing buildings.

Although some program specifics are still being developed and each law takes a somewhat different approach, the primary intent of these initiatives is to upgrade components and improve operations in underperforming buildings.

[Related: Energy-Efficient and Green Strategies to Increase Value of Class B/C Buildings (BOMA 2020)]

BEPS are a natural outgrowth of energy benchmarking requirements that are increasingly popular in large urban areas.

The table below provides an overview of the BEPS requirements for New York City, District of Columbia, and Washington State.

In addition to the three jurisdictions listed in the table, St. Louis, Missouri adopted a BEPS ordinance in April 2020 that will require buildings larger than 50,000 square feet to meet an ENERGY STAR score of 65 (i.e., performing better than 65% of its use group peers) based on site EUI by May 2025.

The action by the City of St. Louis demonstrates that BEPS policies have broad appeal from coast to coast, including Midwest cities.

BEPS Requirements and Impacts

Since traditional energy efficiency programs for existing buildings—such as green building labeling, utility incentives, and tax incentives—have had limited reach and building energy codes apply only when an alteration is already underway and are difficult to enforce, governments are looking for new ideas to incentivize better building performance.

Based on initial information, BEPS may play a significant role in bringing about these changes.

For instance, the Urban Green Council estimates that the NYC standards will grow the energy efficiency retrofit market from the current annual level of $235 million to $3 billion by 2030.

In the initial compliance periods, most buildings may not be affected and, for those that are affected, the energy efficiency improvements mandated may not be overly burdensome.

But over time (i.e., in subsequent compliance periods), the requirements become more stringent in support of jurisdictions’ overall climate goals.

For instance, the NYC emissions limits become much stricter (in the range of 40-60%) between the first and second compliance periods.

Such a large increase in stringency has not yet been proposed for Washington State and the District of Columbia, but the overall intent is certainly aligned with the NYC policy. 

Roof Replacements: A BEPS Compliance Option

For most buildings, the roof is the largest single surface area and can account for 25% of a building’s heat loss.

Since roofs are replaced approximately every 15-25 years, it is especially important for building owners to take advantage of roof replacement projects to improve energy efficiency by adding insulative power with products like polyiso insulation.

The increased thermal performance from investments in polyiso insulation can result in significant energy savings and can serve as an effective compliance strategy for BEPS requirements now or in the future.

This is one of the reasons that roof replacements that incorporate insulation like polyiso have become such a popular retrofit.

In addition to serving as a compliance strategy, building envelope improvements offer a wide range of benefits, including reduced heating and cooling loads that can allow building owners to reduce the size of HVAC systems, leading to further energy savings.

My Jurisdiction Adopted a BEPS. Now What?

The requirements of a BEPS may seem daunting at first glance; however, effective planning on the part of a building owner can align compliance with a building’s normal maintenance and replacement cycle.

Owners that operate buildings in a jurisdiction with a BEPS should consider the following:

1. A BEPS does not create one-time requirements; the standards serve as a mechanism to encourage long-term planning and execution of improvements over time to achieve the goal of net-zero energy.

2. Review the BEPS compliance periods to determine how the stringency of the requirements increase over time.

This timeline should be compared and aligned with the owner’s capital improvement schedule to ensure planned maintenance or component replacement projects to maximize energy savings.

3. Don’t overlook projects like roof replacements that can improve building energy efficiency performance today and minimize compliance difficulty in the future.

Even if a building is not currently subject to BEPS requirements, completing an energy-efficient roof replacement project will lower building energy use, making future compliance more achievable (and less expensive).

Keep in mind that since 2018 businesses have been allowed to expense the full cost of replacing non-residential roofs and HVAC equipment instead of depreciating those costs as a capital expenditure over 39 years. 

This deduction, allowed under section 179 of the Internal Revenue Code for purchases of “qualified property,” is capped at $1.04 million in 2020 (indexed to inflation) and begins to phase out if the annual cost of section 179 property exceeds $2.59 million (indexed to inflation).

The ability to deduct these costs in the first year vs. depreciating them over 39 years significantly reduces their true cost and makes additional financial resources available when it really counts—when energy efficiency measures are being implemented.

Justin Koscher is the president of the Polyisocyanurate Insulation Manufacturers Association (PIMA). Jeff Mang is the legislative services manager for Hogan Lovells.

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